Contract: Payment term went too far
Two public access barristers have failed in their bid to be paid nearly £125,000 in fees after the High Court found the terms of their retainer unfair.
Mr Justice Turner ruled that a key term placing the financial risk of the trial not proceeding entirely on the lay client created a “significant imbalance” between the rights and obligations of the parties.
Katharine Atay instructed Michael Glaser KC and Victoria Miller of boutique London family set Fourteen in financial remedy proceedings against her wealthy former husband.
Mr Glaser said his fees for the pre-trial review hearing in July 2020 and 10-day final hearing in September 2020 would be £108,000 (including VAT).
It was to be paid in four instalments – the first two (totalling £25,100) before the pre-trial review, the bulk (£79,200) on 31 August, three weeks before the trial, and the final £3,700 within 28 days of the final order. Any additional work would be charged at £500 an hour.
The letter stipulated that “if the hearing concludes early or is adjourned to another date or does not go ahead for any reason beyond our control, then the full fee is still payable and another fee will be payable for any adjourned hearing” (the so-called payment term).
Ms Miller’s terms were the same, save that her fees were 50% of Mr Glaser’s.
The first two payments were made but the husband then successfully applied to adjourn the trial and, on 31 August, Ms Atay disinstructed the barristers.
They began proceedings to recover the balance of their fees (£124,350), as well as unpaid fees under further, unspecified contracts reached on 25 August.
At first instance, His Honour Judge Berkley held that the payment term fell foul of the Consumer Rights Act 2015 but that Ms Atay should nevertheless pay 70% of what would otherwise be the contractual sum due by way of quantum meruit. She appealed.
Turner J agreed that the payment term did not fall within the ‘safe harbour’ exclusions of the Act and so had to be subject to the scrutiny of its unfairness test.
Though barristers cannot hold client money, he said Bar Standards Board guidance (gC107) allowed them to agree with a client to reimburse part of a fixed fee with reference to time actually spent.
“This factor is not, of course, determinative of the issue of unfairness but does demonstrate that is possible for a barrister to draft direct access terms which do not compel the consumer to pay up front for all services with no provision for reimbursement without encroaching on the principle that he or she should not hold client’s money.”
He went on to hold that the payment term “created a significant imbalance in the parties’ rights and obligations under the contract”, with the financial risk of the trial not proceeding borne “entirely” by Ms Atay.
“Counsel would thus be entitled to take on alternative remunerative work during the relevant period and any sums thus earned would not go towards reducing the liability of the defendant.
“I accept that it not always easy for counsel, particularly leading counsel, to find work at relatively short notice but it is by no means impossible.”
Agreeing with HHJ Berkley, he said the imbalance was “clearly” to the detriment of the consumer.
There was also the question of fair dealing. Turner J noted that the terms were worded as “a fait accompli and the defendant, as will almost invariably be the case in direct access arrangements, was not separately legally advised”.
The risks of a trial being rendered ineffective were also “much more familiar” to lawyers than to lay clients.
“I do not overlook the fact that the claimants clearly considered the defendant to be a demanding and difficult client but this feature does little of nothing to redress the imbalance in the relationship between professional and lay client.
“One of the occupational hazards of direct access arrangements is that the absence of any instructing solicitor inevitably exposes counsel more acutely to the unfiltered, uncomfortable and persistent demands of the importunate client.”
The judge stressed that he was not suggesting any professional impropriety on the part of the barristers.
“Subjectively, they doubtless considered that there were sound commercial reasons” to set out the terms they did and, had the client not been a consumer, “then the principle of freedom of contract would have readily permitted this”.
“However, on an objective appraisal, the relevant term went significantly beyond what would have been consistent with good faith in the context of the aims and intentions of the statutory framework.”
Once the payment term was removed, that left an entire obligation upon the barristers which included attendance at the trial. Once the trial had been adjourned, this was incapable of being fulfilled.
It followed that they had no contractual right to payment of the agreed price at any time.
Turner J went on to overturn HHJ Berkley’s ruling on quantum meruit, saying that allowing it had the “potential to disincentivise traders from ensuring that the terms under which they contracted were fair”.
He explained: “Otherwise they could opt to incorporate unfair terms in the hope that they would not be challenged but confident that there would be a safety net providing for the payment of a reasonable sum in the event that they were.”
As a result, Turner J dismissed the claim for fees.
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